The Web of Oligopoly ft. the Silicon Titans

Curators: Atul Jairamuka, Devansh Dhandhania, Alekh Kumar Deogharia, Ayush Narayan Ghosh & Rajbir Singh

Introduction

A semiconductor is a tiny chip primarily composed of silicon, essential for connecting conductors and insulators in the electronic devices we use daily. The industry relies heavily on Moore’s Law, which predicts that the number of transistors on a microchip will double approximately every two years. Although Moore’s Law is expected to reach a physical limit by 2025 due to several factors ,some forecasters are optimistic about the continuation of technological progress in a variety of other areas, including AI, quantum computing, etc.

The global semiconductor industry has a market size of approximately $550 billion(2023), with an expected growth rate of almost 8% over the period 2023-2030. The market is estimated to grow to a whopping size of $ 1.1 trillion by 2030. Key players include Intel, Samsung and TSMC.

The Indian industry had a cumulative market size of $27 billion, with an expected growth rate of 18% over the period 2023-2026. The industry is expected to reach a market size of $100 billion by 2030. Key Growth Drivers include Government’s Digital India initiatives, growing EV and automotive electronics demand, rising consumer electronics consumption, and the PLI scheme.

Companies which are expected to benefit from the PLI scheme are namely Vedanta-Foxconn JV, Tata Group, STMicroelectronics, Intel Corporation, Samsung Electronics and Texas Instruments. Uttar Pradesh is one state that is planning to set up a facility for the PLI scheme for semiconductor fabrication, on the lines of Gujarat, Odisha and Tamil Nadu, through the UP Semiconductor Policy 2024

The memory chip market is expected to recover in 2024, returning to 2022 sales levels. PC and smartphone sales are projected to grow by 4% after declines in 2023.Data center sales continue to significantly contribute to overall semiconductor revenues, driven by demand for cloud computing and data storage. The Asia Pacific region dominates the global semiconductor market, with a size of $308.95 billion in 2023, supported by strong manufacturing capabilities. North America is also seeing dynamic growth, fueled by substantial investments in research and development, enhancing the sector’s competitiveness.

Technological Advancements

Semiconductor companies are driving innovation with strategies like “More Moore,” “More than Moore,” and “Beyond CMOS” to meet rising demand. CMOS (Complementary-Metal-Oxide-Semiconductor) technology is fundamental for making processors and memory chips, using pairs of p-type and n-type MOSFETs for logic functions. “Beyond CMOS” seeks to explore new digital logic technologies.

The “More than Moore” approach aims to enhance existing technologies for applications in fields like nanotechnology and biotechnology. Companies are also investigating new materials like gallium nitride and gallium arsenide, which could complement or even replace traditional silicon. Recently, Intel unveiled a magnetoelectric spin-orbit logic device that significantly reduces both voltage and energy consumption, showcasing the potential of these innovative strategies.

Challenges

The global semiconductor industry is currently facing challenges due to the U.S.-China trade conflict, which has resulted in export controls impacting major companies like Huawei. Taiwan Semiconductor Manufacturing Company (TSMC), the largest contract chipmaker, is crucial to the supply chain. Instability in Taiwan, especially related to China’s territorial ambitions, could cause significant disruptions worldwide.The semiconductor sector is grappling with a shortage of skilled workers in vital areas such as chip design and fabrication. Despite experiencing its seventh downturn since 1990 in 2023, the industry is projected to rebound in 2024, with global sales expected to reach $588 billion.

The COVID-19 pandemic led to shortages across automotive and electronics,limited availability of essential materials such as silicon wafers and rare earth elements, having contributed to a decline in sales. Although the industry is now experiencing a recovery, predicted to grow by 16% in 2024, it still struggles to keep up with rising demand.

India still heavily relies on imports for chips and semiconductor components. Local manufacturing of semiconductor fabs is minimal, which leaves the country vulnerable to global supply chain disruptions. India imports nearly 100% of its semiconductors, primarily from China, Taiwan, and the U.S.

Actionable Insights:-

To strengthen the semiconductor sector, diversifying supply chains is crucial. Establishing fabrication plants can reduce reliance on Taiwan and South Korea, while partnerships with India, Vietnam, and Mexico can be beneficial. Investing in education and training, along with scholarships in chip design, will help fill workforce gaps.

India should expedite its Production-Linked Incentive (PLI) Scheme to attract joint ventures with companies like Intel and TSMC. Supporting local startups and the Design Linked Incentive (DLI) will foster a self-sustaining ecosystem. The $10 billion Semicon India Program aims to develop a complete semiconductor ecosystem and position India for significant industry growth.

TATA-PSMC Partnership
The Government of India recently approved a proposal from Tata Electronics to build a mega semiconductor fabrication facility, also known as “Fab” in Dholera, Gujarat in partnership with Taiwan’s Powerchip Semiconductor-Manufacturing-Company(PSMC). This will generate over 200,000 direct and indirect skilled jobs in the region. This Fab will have manufacturing capacity of upto 50,000 wafers per month, and will include next generation factory automation capabilities to achieve much needed efficiency.

This will manufacture chips for applications such as display drivers, microcontrollers(MCU), thus addressing the growth in demand in automotive as well as computing and data storage and AI industries.Taiwan’s leading pure-play foundry company, PSMC will provide access to leading edge and mature technologies. This new initiative will bring to India a portfolio of cutting-edge technologies.

Laws and Regulations

IP laws protect investments in research and development, preventing theft and fostering innovation while encouraging healthy competition. Many governments impose regulations on exporting semiconductor technology due to national security concerns, which limits exports to specific countries.

Environmental and Safety Regulations ensure responsible manufacturing practices and protect worker safety in semiconductor fabs.Governments encourage domestic semiconductor manufacturing through subsidies, grants, and tax breaks(CHIPS Act), aiming to boost self-sufficiency and reduce dependence on foreign supply chains.

REFERENCES

𝑫𝒊𝒔𝒄𝒍𝒂𝒊𝒎𝒆𝒓: 𝑻𝒉𝒆 𝒃𝒍𝒐𝒈 𝒓𝒆𝒇𝒍𝒆𝒄𝒕𝒔 𝒕𝒉𝒆 𝒗𝒊𝒆𝒘𝒔 𝒐𝒇 𝒕𝒉𝒆 𝒂𝒏𝒂𝒍𝒚𝒔𝒕 𝒂𝒏𝒅 𝒊𝒔 𝒊𝒏𝒅𝒆𝒑𝒆𝒏𝒅𝒆𝒏𝒕 𝒐𝒇 𝒕𝒉𝒆 𝒗𝒊𝒆𝒘𝒔 𝒐𝒇 𝑺𝒕. 𝑿𝒂𝒗𝒊𝒆𝒓’𝒔 𝑪𝒐𝒍𝒍𝒆𝒈𝒆 (𝑨𝒖𝒕𝒐𝒏𝒐𝒎𝒐𝒖𝒔), 𝑲𝒐𝒍𝒌𝒂𝒕𝒂.

Joint Secretaries

Devansh Dhandhania
+91 91101 01371

Prisha Anchalia
+91 98363 45511